Speaking at Morgan Stanley’s Global Consumer & Retail Conference, Chris Metz, Vista Outdoor’s CEO, said the company sees “a bifurcation” in its performance amid inflationary pressures “where the more well-heeled consumers and the more well-heeled products we have—higher-end premium products—are doing better than the entry-level.”
On a positive note, Metz said, “At 10,000 feet, when you look at the consumer, the consumer is healthy. I mean, none of us have friends or workers or folks in our lives that are in need of a job. Anybody who wants a job can go out and get a job at a good wage.”
Metz further added that although there’s been a shift to more service and travel-related activities from consumer products, participation in outdoor and hunt-related products remains above pre-pandemic levels to support the company’s brands.
“Demand is still healthy. We still see people participating at really, really high levels,” said Metz. “Now, not quite [the levels] during the COVID period where people had a lot of free time. They went home and could recreate virtually every day. But certainly higher than pre-COVID levels. And what we see across all of our brands collectively is higher participation and more diverse participation both in gender and ethnicity.”
For instance, Jason Vanderbrink, president of Vista’s Sporting Products segment, which Federal, Remington, CCI, Speer and Hevi-Shot, noted that the hunt industry saw an influx of “16 million new gun owners through the pandemic. The new firearms owners are also more diverse, including 40 percent of new gun owners being women.
“We see a lot of stickiness that we have never seen in this industry with a much more diverse user base, which bodes well for the future,” said Vanderbrink.
Metz further cited other favorable trends supporting the Sporting Products segment, including record-high youth participation in trap shooting at the high school level as well as the field-to-table movement.
Metz added that structural changes over the pandemic are also expected to continue to support outsized growth for Vista’s Outdoor Products segment, which includes CamelBak, Bell, Giro, Camp Chef, Bushnell, Bushnell Golf, Foresight Sports, Stone Glacier, and QuietKat as well as the recently-acquired Fox Racing and Simms Fishing brands.
Metz noted that the overall golf category, for example, had been seeing a “pretty flat line type of growth” over the last few decades, but growth was taking off even before the pandemic due to the popularity of off-course participation that includes not only entertainment concepts such as Topgolf but many households installing game simulation launch monitors in their homes.
Metz said, “When I talk to a lot of custom home builders, they’re saying, ‘The theater room of old is now the golf simulator room today.’ So there’s been a structural shift, and it was one of the things that we leaned into with our purchase of Foresight Sports, and it’s one of the best acquisitions we’ve ever made.”
Nonetheless, Metz said that inflation necessities like fuel and food had affected disposable income in opening-price point categories, including hunting and shooting-related accessories as well as bike helmets at the mass channel. He added that part of the softness in bike helmets relates to efforts by mass chains to reduce overall inventory levels.
Metz said, “So think of a Walmart, think of a Target, think of a big box account where we have the largest share of shelf in opening price point bike helmets,” said Metz. “The demand is still there, but because of the overhang of other categories, we have a hard time restocking the shelves.”
A third weaker area is outdoor cooking, where two Camp Chef competitors, Traeger and Weber, both went public last fall and “flooded the markets” with products. Metz added, “There’s a little bit of overhang of inventory, all of which we think is going to work itself out.”
While reporting results for the second quarter ended September 25 on November 3, Vista downwardly adjusted its fiscal full-year outlook to account for the impact of inflation and rising interest rates on consumer spending.
The updated guidance calls for:
- Sales in the range of $3.05 billion to $3.15 billion, up 2 percent at the midpoint, previously, $3.2 billion to $3.33 billion, up 7 percent at the midpoint;
- Outdoor Products sales are expected to be approximately $1.475 billion to $1.550 billion, previously, $1.325 billion to $1.375 billion;
- Sporting Products sales in the range of $1.725 billion to $1.775 billion, same as previous guidance;
- Adjusted EBITDA margin in the range of 19.75 percent to 20.25 percent, previously, 21.0 percent to 21.5 percent; and
- Adjusted EPS in the range of $6.00 to $6.50, previously, $7.05 to $7.65.
Metz said that the promotional climate in the market has impacted all categories to some degree. Said Metz, “Suffice it to say, everything’s on sale. We had muted expectations for Black Friday. It was actually better than we thought. But the word on the street is if you didn’t have a discount or promotion attached to that product, you had less of a chance of it selling. We anticipated this so we built some discounts into some of our products.”
He added that some of Vista’s premium-positioned product, citing Foresight Golf, Bushnell Golf, Stone Glacier, and Sims Fishing, had been “much less promotional.” For such products, price is not among the first two criteria in the consumer’s decision to buy. Metz added, “For that type of consumer, we want to be careful about the value of our brand.”
Overall, Metz said Vista expects elevated inventories across the retail market to rebalance over the next two or three quarters. Said Metz, “As we start moving into summer, and certainly in the late summer/early fall, every retail partner that we talked to said they feel like they’re going to be in a very clean position. And, for us, largely, I’d say 80 percent of our categories are very healthy at retail right now. And what we’ve done is we. have slowed down our sell-in to allow them to right-size their total inventory.”
Vista’s Q2 total inventory at the close of its fiscal second quarter increased 15 percent, excluding acquisitions, with higher inflation among the factors increasing the cost of inventory.